Econometrica Vol. 47 No. 2 1979
Informational Equilibrium
Abstract
[If buyers are less well-informed about product quality than sellers, market prices will reflect average quality. Sellers of high quality products therefore have an incentive to engage in some distinguishing activity which operates as a signal to potential buyers. This paper explores the viability of such signalling or "informational equilibria." It is established that with a continuum of quality levels there is no Nash equilibrium. An alternative non-cooperative equilibrium concept is then developed in which potential price searching agents take account of possible reactions by other agents. It is shown that there is a unique "reactive" informational equilibrium.]
- DOI
- 10.2307/1914187
- Volume
- 47
- Issue
- 2
- Pages
- 331
- Sources
- bibtex:phds-export.bib crossref openalex